Samsung UpStage M620

Only get phone# of text messager - not name

I bought my daughter the Upstage and she loves it except for one thing: when she is texting, the incoming text messages are not identified by the person's name in her contact list - only by phone number. The phone is not connecting incoming phone number with contact name. Caller ID works fine - so for incoming phone calls the name appears.

She is pretty good at remembering people's phone numbers, but the list is getting longer and this seems pretty silly. Are we doing something wrong?